Ministry to give Kingfisher local slots, global flying rights to other carriers

Kingfisher Airlines flew to eight countries and these traffic rights were allocated to the firm between 2008 and 2011. Photo: Parivartan Sharma/Reuters

Updated: Tue, Feb 26 2013. 05 38 PM IST

Mumbai: India has scrapped international flying rights and domestic slots of grounded Kingfisher Airlines Ltd, the aviation ministry said on Monday, which could make its planned, phased restart even more difficult.

“The Airports Authority of India has been directed to make these slots available to other domestic carriers as per their demand,” the ministry said in a statement. The international traffic rights are being withdrawn due to “non-utilization” and will be made available to other carriers, the ministry said.

The cancellation of rights to fly overseas will “give additional availability of approximately 25,000 seats per week for use by other Indian carriers to these eight countries, some of which are much in demand by these carriers”, the ministry said.

Kingfisher Airlines, controlled by liquor baron Vijay Mallya and once India’s second biggest carrier, has not flown since October after operations were halted due to a cash crunch.

Kingfisher Airlines flew to eight countries including Bangladesh, Hong Kong, Nepal, Singapore, Sri Lanka, Thailand, Dubai in the United Arab Emirates and the UK. These traffic rights were allocated to the firm between 2008 and 2011.

State-run Airports Authority of India warned Kingfisher Airlines that it would start taking away space allotted to the troubled airline at airports across the country if it failed to submit a “functional” revival plan by mid-January, Mint reported on 3 January.

Private airports, such as those in Delhi and Mumbai, have already started giving slots held by Kingfisher Airlines to other airlines.

In mid-February, lenders to Kingfisher Airlines said they had decided to recall all loans given to Vijay Mallya’s stricken airline, kicking off the process for the recovery of Rs.7,000 crore in debt.

However, the airline said it hasn’t received any formal communication from banks on the recall of loans advanced by them to the financially stricken airline.

Kingfisher Airlines has been grounded since 1 October, first because of staff protests against unpaid salaries and thereafter because of regulatory issues. Its flying licence expired on 31 December, although that can be revived through a reapplication.

The move was expected since other airlines would have put pressure on the ministry to free up the international and domestic slots, said Bharath Mahadevan, who until recently was regional manager for north-east Asia at Jet Airways (India) Ltd.

“So the ministry would have to release these rights and slots at some point. In terms of Kingfisher Airlines’ revival, this is a blow but not a major one as they have to cross several financial hurdles before they even come back to the issue of slots. Once they are adequately funded and get all their NOCs (no-objection certificates), then they can simply reapply for these slots,” Mahadevan said.

“If they are available they can get them. If not, some solution can be worked out, especially for the domestic slots. International slots would be the last thing on the airline’s agenda. It would be looking at a limited restart of domestic first and then growing,” Mahadevan added.

Kingfisher Airlines declined to comment.

A Kingfisher Airlines executive, requesting anonymity, said, “Chairman Vijay Mallya is willing to put in money after the Diageo-USL deal is cleared. But he has to face several stumbling blocks even for a phased restart,” he said.

Diageo Plc, the world’s largest liquor company, is to acquire 53.4% of United Spirits Ltd (USL), a unit of the UB group. It agreed to purchase a 27.4% stake in USL, including 19.3% from UB group chairman Mallya, for £660 million (around Rs.5,398 crore today) and fresh equity from the firm; the remaining stake would be bought in an open offer to public shareholders. The deal is awaiting final clearance from Competition Commission of India.

“The banks explicitly support the transaction with Diageo and would work with us in finding an orderly method of disposal of some of the pledged shares to Diageo if appropriate,” Prakash Mirpuri, vice-president, corporate communications, UB group, the parent company of Kingfisher Airlines, said on 15 February.